₦airaland Forum

Olumyco:
This is Economics 101.... Demand and Supply.

Actually the question should be relative value and not just value.

To understand it very well. Let us see Dollar as a commodity. If there is a shortage of Dollar and we don't want it to finish, what will be done is to increase the amount of money to buy it.

If I need 2 naira to buy 1 dollar, the way the dollar will finish... infact within two days all our dollars in our foreign reserve will get depleted. But if I need like 10 naira to buy 1 dollar, the demand for it will reduce. If I increase to like 100 naira, the quantity of dollar that will be bought will reduce.

So what CBN does is to regulate the amount of money needed to purchase the dollar so that it won't finish faster and can also be commensurate to how the dollar flows in. So its a balance of rate at which dollar flows in and flows out.

Therefore the reason why naira is low compared to dollar is simply because:

1. There is low supply of dollar

Solution
a. We need to increase our export by becoming more heavily industrilized. Exporting raw materials won't make us achieve this. We need to export more finished goods and services.

2. There is high demand for dollar

Solution
We need to decrease our import by becoming industrialized also which will make us produce and consume locally without the need to import everything we consume in the country.

Facts

Things that take away our dollar

1. IT: Phones, Electronic gadgets etc are imported

2. IT: Hosting websites, buying domain name etc

3. Many sends their children abroad to go and school

4. Medical Tourism

5. Some people uses their naira ATM to withdraw dollars abroad. The deduction falls on our foreign reserve.

6. We export crude oil and import refined oil. It's terrible

And so on...

Measures Used by CBN to control this

1. The CBN tries to control this by reducing the amount that can be transacted in dollars per day which is 100 dollar.

2. Refusing to give dollar to importers who wants to import what we produde already in the country

3. Banning of illegal forex organizations

And so on.

Another Solution to this

1. The government should encourage remote work by encouraging people in the IT space to do remote work with foreign companies.

2. The government should ban some imported goods to allow locally made goods to thrive

3. The government should study the goods and services we import, then try and get a foreign investor to come and establish the company that produces such or render such services here in the country.

4. The government should stop politicians from seeking medical support abroad.

And so on

Thanks.

Hismasterpiece:
Hello.

Recently i have been hearing about the dollar going up in value.

And this has brought about a hike in the prices of commodities in the market and has also brought about a hike in the cost of living of the average Nigerian.

So things are tough in the country now because of this dollar phenomenon

So i would like to know what determines the value of a country's currency and why the Nigerian Naira appears to constantly reducing in value while that of America keeps going higher and higher.

Anybody with meaningful information is welcome. Thanks.

ITbomb:
When you don't produce anything that another country would need, your currency falls

If what you are producing is wanted by another country, your currency will be strong

Problem is that we depend on oil as we cannot produce any other thing, so when we were producing and selling oil at high quantities, our currency was stable.
Now that most buyers of oil are looking elsewhere, we don't sell enough to balance what we are buying from other countries, so our Naira falls

I believe this is "layman" enough

Olumyco:
This is Economics 101.... Demand and Supply.

Actually the question should be relative value and not just value.

To understand it very well. Let us see Dollar as a commodity. If there is a shortage of Dollar and we don't want it to finish, what will be done is to increase the amount of money to buy it.

If I need 2 naira to buy 1 dollar, the way the dollar will finish... infact within two days all our dollars in our foreign reserve will get depleted. But if I need like 10 naira to buy 1 dollar, the demand for it will reduce. If I increase to like 100 naira, the quantity of dollar that will be bought will reduce.

So what CBN does is to regulate the amount of money needed to purchase the dollar so that it won't finish faster and can also be commensurate to how the dollar flows in. So its a balance of rate at which dollar flows in and flows out.

Therefore the reason why naira is low compared to dollar is simply because:

1. There is low supply of dollar

Solution
a. We need to increase our export by becoming more heavily industrilized. Exporting raw materials won't make us achieve this. We need to export more finished goods and services.

2. There is high demand for dollar

Solution
We need to decrease our import by becoming industrialized also which will make us produce and consume locally without the need to import everything we consume in the country.

Facts

Things that take away our dollar

1. IT: Phones, Electronic gadgets etc are imported

2. IT: Hosting websites, buying domain name etc

3. Many sends their children abroad to go and school

4. Medical Tourism

5. Some people uses their naira ATM to withdraw dollars abroad. The deduction falls on our foreign reserve.

6. We export crude oil and import refined oil. It's terrible

And so on...

Measures Used by CBN to control this

1. The CBN tries to control this by reducing the amount that can be transacted in dollars per day which is 100 dollar.

2. Refusing to give dollar to importers who wants to import what we produde already in the country

3. Banning of illegal forex organizations

And so on.

Another Solution to this

1. The government should encourage remote work by encouraging people in the IT space to do remote work with foreign companies.

2. The government should ban some imported goods to allow locally made goods to thrive

3. The government should study the goods and services we import, then try and get a foreign investor to come and establish the company that produces such or render such services here in the country.

4. The government should stop politicians from seeking medical support abroad.

And so on

Thanks.

ITbomb:
When you don't produce anything that another country would need, your currency falls

If what you are producing is wanted by another country, your currency will be strong

Problem is that we depend on oil as we cannot produce any other thing, so when we were producing and selling oil at high quantities, our currency was stable.
Now that most buyers of oil are looking elsewhere, we don't sell enough to balance what we are buying from other countries, so our Naira falls

I believe this is "layman" enough

VeeVeeMyLuv:
It is not that Dollar is going up

Instead it is your naira that is diving downwards.

@ topic

1. Fisical responsibility and accountability.
2. The level of greed & corruption.
3. Human rights law.
4. Foi.
5. Ease of doing business
6. Level of insecurity
7. Amount of export to import.

I think these points are sufficient

Hismasterpiece:
so doing business in Nigeria isn't easy? how do you mean?

how does insecurity affect the country's currency value

doesn't nigeria export oil among other things?

Metrofox:
When people can't go about their daily productive activities eg farming , how can you get products to export and get Dollars in return

Fortune118005:
Economic growth

greggng:
Like most assets, a currency is ruled by supply and demand. When the demand for something goes up, so does the price. ... Because more dollars are needed to buy the same amount of yen, the dollar becomes a weak currency. In the case if Nigeria we need more naira to buy dollars ...the Nigeria becomes weaker

Wonberi:
you are correct, but don't forget more investors still troop into UAE. The number of New and renewed Trade license daily is on the high side because of the easy of doing business, security, and so on... What can Nigeria offer a foreigner to invest in the country's economy; high electricity bill is not the problem but poor supply, poor transportation( staffs and commodities), insecurity and so many negative vibes. I hope i myself have a proposal to end all these negatives but it seems impossible. something like a curse.

AlwaysMotun:
when there is no security in a country, the Investors who are supposed to bring in money to invest in the country will not come, they will fear for the bandit. The same also goes for ease of doing business... Investors are looking for countries whose policies are stable and progressive and not the ones that will wake up tomorrow to ban different inventions and companies as we have in the past few months.

SlayerForever:
Who told you so.

Born2conquer:
Tourism
UAE earns massively from tourism

Hismasterpiece:
Isn't oil the main export of UAE? Or is there something else i don't know?

teelaw4life:
Insecurity = No FDI...or foreign direct investment.

Say for example, you have a house where you sell goods. But on the next street, there is a house where the tenants are much. So you decide to start selling your goods in that house.
But the problem is every time you send your worker to the place, they get robbed or killed...and you make losses.

Now, in this analogy, you are the seller from a foreign country, the house on the other street is Nigeria. The money and goods you take to the other house is the FDI...your workers getting robbed constantly is the insecurity

smeag0l:
Op, here are the most important factors that determines the value of a country's currency. Any other thing are just offshoots of the factors listed below. I'll list them here and that's it. If you have any questions on how each of these affect the naira you can let me know so I'll elucidate.
1. Unemployment rate.
2. The country's apex Bank interest rate on lending
3. Balance of trade.
4. Level of manufacturing or industrial production in the country also called manufacturing index.
5. Political stability.
6. Inflation rate
7. Consumer confidence
8. A country's balance of payment and gearing

MALIGNANTGuest:
The VALUE of a President's Brain can also be used to measure the value of that country's currency.
IF your PRESIDENT is an IDIOT, the value will definitely drop.
But if he's got a quality IQ, it will appreciate.

Sanniwonder8:
the main reason for our disvaluation of Nigeria currency nowadays is because will are spending the money that we did not work for. money without value added to. we get money without product or service render, that is y money we are spend in Nigeria, the value is in the other countries will no render any product or service and we are collecting money we call it yahoo yahoo unless yahoo reduce Nigeria currency we never regain there value again. only solution is to reduce the level of yahoo yahoo so that our naira will regain it value and to reduce the inflation in the country

dedunji:
What does Ghana and south Africa produce the problem is Buhari and osibanjo who drives joy in keeping Olodos in power

Susily:
What's Foi?

Hismasterpiece:
How do the bolded affect our Naira?

smeag0l:
Let me do justice to this based on the lay man macroeconomics I learnt in school. Unemployment rate is the single most importantfactor that affects a country's currency(naira inclusive).when more people are unemployed , the population becomes poorer and the central Bank embarks on monetary easing measures like reducing interest rates and printing more money. Some crude measures like giving out cash to cushion poverty e.g tradermoni were embarked upon in Nigeria. This weakened our currency. Besides, it also feeds into a lower CPI or consumer price index which will be discussed under consumer confidence. On balance of trade, a country that exports more than it imports has a positive balance of trade and vice versa. The currency of such a country appreciates and this is because everybody wants their product. Therefore , they get foreign currency as a result and convert it to their own currency thereby raising the demand for the local currency and ,thus, its price. It is the reverse for a country that imports more than it exports. Nigeria currently imports almost everything. The third one is political stability. A country that is almost always changing government, plagued by wars or changing economic and government policies frequently will see the value of its currency plummet. Nigeria, for example, comes up with several policies, acts and bills frequently and most of these are anti-people and therefore impacts business badly. This leads to a lack of appetite for investment in the country hence a depreciationof the naira. Lastly, consumer confidence , measured by the consumer price index, is defined as how safe and secure consumers feel about their income stability. Let me bring it home to Nigeria. Currently, the populace(who are the consumers) feel that their jobs are not secure and their income is often eroded by the increase in the price of commodities and essentials. Therefore, people are afraid to spend the money they have at hand because they don't know what will happen tomorrow. They'd rather hoard and even convert it to dollars or some other stable currency. This has a knock-on effect on businesses in that they won't make enough money and a further knovk-on on the government revenue and the economy in 6hat government won't get enough taxes from these businesses. Consumer spending is the singular most contributor to the GDP of every country. By the way, I have indepth knowledge of all these things cos I trade forex.

Hismasterpiece:
You trade forex? Under what platform did you learn?

Hismasterpiece:
What makes the economy grow?

smeag0l:
I learnt from an institutional trader in the UK

Hismasterpiece:
I'm talking about retail forex o.

For how long have you been trading?

smeag0l:
I trade retail forex but learnt from an institutional trader. 7 years